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Tax Tips for Seniors

Updated on March 13, 2008

The tax code is very long and confusing, but there are also options and opportunities for taxpayers. The tax code changes every year, and has since 1914. The current tax code is over 50,000 pages long. All attempts to reduce the confusing code have failed—even the Tax Reduction Act couldn’t simplify it.

If you aren’t a tax guru, you really should contact a Certified Financial Planner (CFP) who is also a Registered Investment Adviser. A CFP can access your financial situation to help you find the best tax options for you. There are a ton of opportunities to help you reduce your taxes, but I will provide a few for you.

Municipal Bond Interest: Check to see if your municipal bond interest is causing your social security check to be taxed at a higher rate. If the government rules that the interest earned comes from private activity, it can mess with your Social Security taxes.

Reduced Tax Rates: Reduced tax rates on capital gains and dividends have been extended until 2010 (they were originally set to expire in 2008). The current maximum rate is 15%.

Net Unrealized Appreciation: If you own company stock in a 401k plan that qualifies as Net Unrealized Appreciation (NUA), the stock might be eligible to be removed from the 401k at a 15% tax rate instead of the ordinary rate. You should call your company’s personnel department to see if the stocks qualify for this.

IRA to Roth IRA: You should consider converting your regular IRA to a Roth IRA if you have money outside of your IRAs to pay the tax bill. In 2010, and only in 2010, you can spread the taxable income evenly between 2011 and 2012. This might not save you money, but will let you pass your IRA to your children tax free.

Tax Assistance

The AARP Tax-Aide is available for seniors, providing free tax preparation assistance. The Tax-Aide will help anyone with low and middle incomes, but people age 60 and older are given special tax attention. You don’t have to be retired or an AARP member to use these services.

Make sure you have someone you can trust to help you make financial decisions. There are a lot of scams out there, so it is important to only work with certified and registered financial planners. If anything seems unclear or suspicious to you, don’t be afraid to ask questions.

Your income changes after you retire, so the way you do your taxes will change as well. If you find yourself feeling confused about all of the different tax codes and rules, know you aren’t alone: even Albert Einstein couldn’t figure them out.


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    • MrTrustStore profile image

      Randall Kaiden 6 years ago from Oxnard & Santa Clarita, CA

      Great hub. I would just add that it is a good idea to consult a tax attorney when making any major moves such as selling or retitling capital assets. Planning with an attorney can help to minimize taxes for seniors as well as to help seniors consider numerous issues that others may not have thought about.

    • profile image

      Nancy's Niche 8 years ago

      Good information for us seniors...Now if we could keep the government out of our pockets and the social security trust fund, we'd have it made...

    • Jonnelle profile image

      Jonnelle 9 years ago from Centennial, CO

      Great information to share with those that are in the caregiver role.

    • Eileen Hughes profile image

      Eileen Hughes 9 years ago from Northam Western Australia

      good hub, helpful links for us seniors. thanks again

    • mrs know it all profile image

      mrs know it all 9 years ago from The Windy City Suburbs

      great hub, good links. My mom is a senior so always watching out for her. Thanks